Cross-border payments platform Conduit Technology has sued Tether in the US District Court for the Southern District of New York, alleging the stablecoin issuer froze $2.76 million in USDt without justification on Sept. 24, 2025.

The complaint, filed Monday, claims Tether identified Conduit's digital treasury wallet as connected to two companies under investigation by Brazilian federal police and unilaterally blocked access to the funds. Conduit maintains the money belongs entirely to the company and that Tether had "no legal entitlement" or "claim" to the assets.

Why did Tether freeze the funds?

According to the lawsuit, Tether's action stemmed from a 2024 Brazilian federal police investigation into financial intermediary Bull Intermediação de Negócios and Onix. Tether allegedly linked Conduit's wallet to those entities "on its own initiative using its own criteria," Conduit's counsel wrote in the filing.

Conduit began accumulating USDt in its treasury wallet in May 2025. Four months later, the company found itself locked out of the entire $2.76 million balance. The freeze, Conduit argues, has "materially impacted its business."

"The funds are unequivocally Conduit's, but Tether has taken them and is denying Conduit access to them," the complaint states.

What does Conduit want?

Conduit's counsel argues the freezing mechanism that Tether reserves for sanctioned addresses was misapplied. Tether maintains a blacklisting function that lets it block specific wallet addresses — a tool the company has used to comply with law enforcement requests and, in its own telling, to assist authorities tracking illicit finance.

"Tether is not allowed to take money from businesses just because they chose to store that money in Tether's currency," the complaint continues.

Conduit said it repeatedly asked Tether to lift the freeze; as of Monday, the request remained unanswered. Tether did not respond to a request for comment at the time of reporting.

How does this fit Tether's broader enforcement footprint?

The Conduit action comes roughly a month after two Thai nationals sued Tether for allegedly freezing $42.4 million in USDt following what their complaint described as an "informal request" from US Homeland Security Investigations. Those funds tied to a $61 million pig-butchering case in the US District Court for the Eastern District of North Carolina, where a seizure warrant for the USDt issued in February.

Tether has framed its freezing capacity as a compliance asset. The company has publicly stated it helped freeze $550 million in Iran-linked USDt during 2025 — a figure the issuer cites to counter criticism that stablecoins enable sanctions evasion.

Critics, including some of Tether's competitors, counter that the issuer's lack of a traditional banking relationship and its opaque freezing criteria expose legitimate holders to collateral damage from third-party investigations. The Conduit complaint leans into that argument: the company alleges it had no notice, no prior flagging, and no procedural avenue to challenge the freeze before Tether executed it.

What happens next?

The Southern District of New York filing sets the stage for discovery on whether Tether's freeze was triggered by a formal legal request, an internal compliance decision, or coordination with Brazilian authorities. Conduit is likely to seek both preliminary relief to unfreeze the wallet and damages.

The case lands during a period of intensifying regulatory focus on stablecoin issuers' gatekeeping powers. The outcome will test how courts weigh an issuer's discretion to block transactions against a holder's property rights — a question with material implications for every institutional USDt custodian operating across borders.